Fid. Nat'l Title Ins. Co. v. Captiva Lake Invs., LLC

• Decision Date: 22 April 2013
• Docket Number: Case No. 4:10–CV–1890 (CEJ).
• Citation: 941 F.Supp.2d 1121
• Parties: FIDELITY NATIONAL TITLE INSURANCE COMPANY, Plaintiff, v. CAPTIVA LAKE INVESTMENTS, LLC, Defendant.
• Court: U.S. District Court — Eastern District of Missouri

941 F.Supp.2d 1121

FIDELITY NATIONAL TITLE INSURANCE COMPANY, Plaintiff,

v.CAPTIVA LAKE INVESTMENTS, LLC, Defendant.

Case No. 4:10–CV–1890 (CEJ).

United States District Court,

E.D. Missouri,

Eastern Division.

April 22, 2013.

Thomas J. Fritzlen, Martin, Leigh, Laws & Fritzlen, P.C., Shawn T. Briner, Kansas City, MO, Mary W. Giles, Martin and Leigh, P.C., St. Louis, MO, for Plaintiff.

Steven D. Hall, Richard A. Wunderlich, Lewis Rice, St. Louis, MO, for Defendant.

MEMORANDUM AND ORDER

CAROL E. JACKSON, District Judge.

This matter is before the Court on the parties' cross motions for partial summary judgment. Upon review of the parties' briefs, the Court concludes that factual determinations preclude summary judgment on the parties' claims. However, the Court will address some of the parties' arguments regarding interpretation of the policy.

This dispute concerns the availability of coverage under a loan policy of title insurance (loan policy) issued in conjunction with a development project. The loan policy was issued by Lawyers Title Insurance Company (Lawyers Title) to National City Bank to protect the priority of the bank's interest in a deed of trust. Plaintiff Fidelity National Title Insurance Company (Fidelity) is the successor by merger to Lawyers Title. Defendant Captiva Lake Investments, LLC (Captiva), claims coverage under the policy as a successor or assignee of National City Bank. Captiva asserts that Fidelity must provide defense and indemnification with respect to various mechanics' liens and for unmarketability of title that Captiva asserts arises from the liens. Fidelity asserts that it has provided a defense for the mechanics' liens, that a policy exclusion bars coverage, and that the policy does not provide coverage for Captiva's alleged unmarketability of title. Both parties bring claims for declaratory judgment; Captiva additionally brings claims for breach of contract and tortious interference.

I. Background

On March 13, 2006, National City Bank agreed to loan Majestic Pointe Development Company, LLC, (Majestic Pointe) $21,280,000 for completion of a condominium project. Majestic Pointe executed a deed of trust in favor of National City Bank, which purchased title insurance to insure the priority of its interest in the deed of trust. Lawyers Title issued a loan policy on March 15, 2006. [Doc. # 1–1]. National City Bank subsequently increased the amount of its loan to Majestic Pointe and, on October 25, 2007, an amended deed of trust reflecting the increased loan amount was recorded. Lawyers Title issued a Modification Endorsement to the policy that increased the loan insurance amount to $22,380,00.00 and amended the date of the policy to October 25, 2007. [Doc. # 1–2]. No other changes material to this dispute were made to the policy.

The construction project ran into difficulties and, starting in April 2008, several mechanics' liens were filed. In mid–2009, National City sold Majestic Pointe's loan to defendant Captiva which subsequently foreclosed on the property. On July 29, 2009, Captiva made a claim under the policy, demanding that Lawyers Title provide a defense against the mechanics' liens and pay any resulting claims. [Doc. # 2–4]. On October 1, 2009, Lawyers Title notified Captiva that it would provide a defense, subject to a reservation of its right to later deny coverage under the policy. [Doc. # 2–5]. Lawyers Title retained the law firm of Sauerwein, Simon & Blanchard (SSB) as counsel to defend Captiva in the mechanics' liens actions. The claims of six contractors have been decided in Captiva's favor, five claimants have obtained a judgment against Captiva, and the status of several more liens is not apparent from the record.

On November 3, 2009, Captiva entered into an agreement to sell the property to a third party. It was a condition of the sale that Lawyers Title agree to issue a lender's policy of title insurance with full mechanics' lien coverage without exception for liens on the property prior to Captiva's acquisition of the property, or provide affirmative insurance coverage for the mechanics' liens. [Doc. # 184–10]. Lawyers Title refused to commit to issuing the coverage. Id. On November 17, 2009, the buyer notified Captiva that it would not complete the purchase of the property. [Doc. # 184–11]. On August 3, 2010, Captiva submitted a claim for unmarketability of title. Captiva alleges that it is unable to sell or obtain a loan on the property, due to the uncertainty created by the question of coverage for the pending mechanics' liens. J. Barnes letter [Doc. # 2–6].

Additional facts will be provided as necessary.

II. Legal Standard

Rule 56(a) of the Federal Rules of Civil Procedure provides that summary judgment shall be entered if the moving party shows “that there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law.” In ruling on a motion for summary judgment the court is required to view the facts in the light most favorable to the non-moving party and must give that party the benefit of all reasonable inferences to be drawn from the underlying facts. AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir.1987). The moving party bears the burden of showing both the absence of a genuine issue of material fact and its entitlement to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Once the moving party has met its burden, the non-moving party may not rest on the allegations of his pleadings but must set forth specific facts, by affidavit or other evidence, showing that a genuine issue of material fact exists. United of Omaha Life Ins. Co. v. Honea, 458 F.3d 788, 791 (8th Cir.2006) ( quotingFed.R.Civ.P. 56(e)). Rule 56 “mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corporation v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

III. Discussion

Under Missouri law, which applies in this diversity case, the rules governingthe interpretation of insurance policies are well settled. Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74, 77 (Mo.1998) ( en banc ). A court must apply the general rules of contract construction when interpreting an insurance policy, because insurance policies are contracts. Todd v. Missouri United Sch. Ins. Council, 223 S.W.3d 156, 160 (Mo.2007) ( en banc ). If the language in an insurance contract is clear and unambiguous, the court must construe the contract as written. Wasson v. Shelter Mut. Ins. Co., 358 S.W.3d 113, 120 (Mo.Ct.App.2011) (quotation marks and citation omitted). The words of a policy are given their ordinary meaning unless it is obvious that a technical meaning was intended. Gateway Hotel Holdings, Inc. v. Lexington Ins. Co., 275 S.W.3d 268, 275–76 (Mo.Ct.App.2008) (citation omitted). The policy “must be given effect according to the plain terms of the agreement, consonant with the reasonable expectations, objectives and the intent of the parties.” Id. (citation omitted).

Where no ambiguity exists in the contract, the court enforces the policy as written. Peters v. Employers Mut. Cas. Co., 853 S.W.2d 300, 302 (Mo.1993)(en banc); see also Black & Veatch Corp. v. Wellington Syndicate, 302 S.W.3d 114, 125 (Mo.Ct.App.2009) (“Unless the insurance policy is ambiguous, the intent of the parties is determined based on the contract alone, and not based on extrinsic or parol evidence.”). An insurance policy is ambiguous when the language of the policy is susceptible to multiple interpretations and its meaning is uncertain. Green v. Penn–America Ins. Co., 242 S.W.3d 374, 383 (Mo.Ct.App.2007) (citation omitted). Ambiguous language is construed against the insurer. Peters, 853 S.W.2d at 302. Where an insurer seeks to avoid coverage under a policy exclusion, it has the burden of proving the applicability of the exclusion. Heringer v. American Family Mut. Ins. Co., 140 S.W.3d 100, 103 (Mo.Ct.App.2004).

A. Unmarketability of Title

Captiva asserts that the pendency of mechanics' liens renders its title to the property unmarketable and claims coverage under the policy.

The policy states:

SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B[,] AND THE CONDITIONS AND STIPULATIONS, LAWYERS TITLE ... insures, as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the Amount of Insurance stated in Schedule A, sustained or incurred by the insured by reason of:

* * *

3. Unmarketability of the title;

* * *

“Unmarketability of title” is defined as:

[A]n alleged or apparent matter affecting the title to the land, not excluded or excepted from coverage, which would entitle a purchaser of the estate or interest described in Schedule A or the insured mortgage to be released from the obligation to purchase by virtue of a contractual condition regarding the delivery of marketable title.

[Doc. # 1–1].

Fidelity asserts that the policy only covers unmarketability of title that arises from conditions that existed before October 25, 2007, the amended policy date. Generally, title insurance operates to protect a purchaser or mortgagee against defects in or encumbrances on title which are in existence at the time the insured takes title. Firstland Village Associates v. Lawyer's Title Ins. Co., 277 S.C. 184, 284 S.E.2d 582, 583 (1981). Thus, title insurance differs from most other types of insurance because it seeks to eliminate risk of loss arising from past events, rather than assuming risk of loss for future events and then distributing the risk among policyholders. Crossman v. Yacubovich, 290...